UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
HMG/COURTLAND PROPERTIES, INC.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
(2) Aggregate number of securities to which transaction applies:
N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
N/A
(4) Proposed maximum aggregate value of transaction:
N/A
(5) Total fee paid:
N/A
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
HMG/COURTLAND PROPERTIES, INC.
2701 South Bayshore Drive
Coconut Grove, Florida 33133
------------------------------
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 7, 1998
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July 10, 1998
TO THE SHAREHOLDERS:
The annual meeting of shareholders of HMG/Courtland Properties, Inc.
(the "Company") will be held at 10:30 A.M., on August 7, 1998 at the Grove Isle
Club and Resort, 4 Grove Isle Drive, Coconut Grove, Florida for the following
purposes:
1. To elect a Board of Directors;
2. To act upon the approval of a new advisory agreement between
the Company and HMG Advisory Corp.; and
3. To transact such other business as may properly come
before the meeting.
The record date for determining shareholders entitled to notice of and
to vote at the annual meeting is June 30, 1998.
Enclosed is a copy of the Company's Annual Report for the fiscal year
ended December 31, 1997.
It is important, whether or not you plan to attend the meeting in
person, that you fill in, sign and date the accompanying proxy and return it
promptly in the postage prepaid envelope which is enclosed for your convenience.
The signing and mailing of the proxy will not affect your right to vote your
shares in person if you attend the meeting and desire to do so.
By Order of the Board of Directors
Lawrence I. Rothstein
Secretary
<PAGE>
PROXY STATEMENT
of
HMG/COURTLAND PROPERTIES, INC.
The accompanying proxy is solicited by the Board of Directors for use
at the annual meeting of shareholders and is being mailed with this Proxy
Statement to all shareholders on July 10, 1998. If a proxy card is properly
signed and is not revoked by the shareholder, the shares of common stock of the
Company (the "Shares") represented thereby will be voted at the meeting in
accordance with the instructions, if any, of the shareholder. If no instructions
are given, they will be voted for the election of Directors nominated by the
Board of Directors and for approval of the new advisory agreement (the "Advisory
Agreement") between the Company and HMG Advisory Corp. (the "Advisor"). Any
shareholder may revoke his proxy at any time before it is voted by giving
written notice of revocation to the Secretary of the Company.
Holders of Shares of record at the close of business on June 30, 1998
are entitled to notice of and to vote at the meeting. On that date, there were
1,100,235 Shares outstanding. Each Share is entitled to one vote on all business
of the meeting. The holders of a majority of the outstanding Shares, present in
person or represented by proxy, will constitute a quorum at the meeting.
Abstentions and broker non-votes are counted for purposes of determining the
presence or absence of a quorum for the transaction of business. Abstentions are
counted in tabulations of the votes cast on proposals presented to stockholders,
whereas broker non-votes are not counted for purposes of determining whether a
proposal has been approved. As of June 30, 1998, Transco Realty Trust
("Transco"), 2701 South Bayshore Drive, Coconut Grove, Florida 33133, was the
beneficial owner of 477,300 Shares, or 43% of the outstanding Shares. As of June
30, 1998, Barry S. Halperin, 441 South Federal Highway, Deerfield Beach, Florida
33441, was the beneficial owner of 66,900 Shares, or 6% of the outstanding
Shares. Beneficial ownership is based on sole voting and investment power.
The Company has been advised by its officers and nominees for
directors, and their affiliated shareholders, Transco and Courtland Group, Inc.
("CGI"), that they intend to vote for the election of each of the nominees and
for the approval of the Advisory Agreement. Such shareholders own in the
aggregate 566,830 shares, or 52% of the outstanding Shares. As a result, each of
the nominees is expected to be elected as a Director and the Advisory Agreement
is expected to be approved. As noted below, certain Directors of the Company are
affiliated with principal shareholders of the Company and are principal
shareholders, directors and officers of the Advisor. See "Election of Directors"
below for information concerning holders who may be deemed to own beneficially
more than 5% of the outstanding shares.
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<PAGE>
ELECTION OF DIRECTORS
The entire Board of Directors will be elected at the annual meeting of
shareholders to serve until the next annual meeting of shareholders and until
the election and qualification of their successors. In the event any nominee
should not continue to be available for election, proxies may be voted for the
election of a substitute nominee or the Board of Directors may elect to reduce
the number of Directors. The Board of Directors has no reason to anticipate that
any nominee will not be available for election. All of the nominees have been
elected previously by the shareholders, except Lawrence I. Rothstein who was
appointed as a director by the Board of Directors in April 1998. Gustav Eysell
passed away on January 28, 1998 after having served as a director for over 26
years.
An affirmative vote by the holders of a majority of the Shares present
in person or by proxy at the Annual Meeting of Shareholders is required for the
election of each Director.
Set forth in the table below is certain information about each current
Director, each nom inee for Director and the Shares held by all Directors and
executive officers as a group.
<TABLE>
<CAPTION>
Shares Held as of June 30, 1998(1)
Principal Occupation or Shares Owned Additional Shares in
Name, Age, Year Employment During the by the which the Nominee
First Became a Past Five Years Other Nominee or has, or Participates
Director or Officer of than with the Company Members of in, the Voting or Total Shares and
the Company and Other Information His Family(1) Investment Power(2) Percent of Class
- ------------------------- ----------------------------- ----------------- ------------------------ --------------------
<S> <C> <C> <C> <C>
Maurice Wiener Chairman of the Board 35,100(4) 541,830(3) 576,930(3),(4)
56-1974 and Chief Executive 49%
Chairman of Officer of the Advisor;
the Board of Executive Trustee,
Directors, President Transco Realty Trust;
and Chief Executive Director, T.G.I.F. Texas,
Officer Inc.; Trustee, Heitman
Real Estate Fund;
Chairman of the Board
and Chief Executive
Officer of CGI
Lawrence I. Director, President, 25,000(4) 541,830(3) 566,830
Rothstein Treasurer and Secretary of 48%
45-1983 Advisor; Trustee and
Director, Senior Vice-President of
Vice-President, Transco; Director,
Treasurer and President, and Secretary
Secretary of CGI
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<PAGE>
Principal Occupation or Shares Owned Additional Shares in
Name, Age, Year Employment During the by the which the Nominee
First Became a Past Five Years Other Nominee or has, or Participates
Director or Officer of than with the Company Members of in, the Voting or Total Shares and
the Company and Other Information His Family(1) Investment Power(2) Percent of Class
- ------------------------- ----------------------------- ----------------- ------------------------ --------------------
Walter G. Arader President, Arader, Herzig 12,800(4) 0 12,800(4)
78-1977 and Associates, Inc. 1%
Director (financial and management
consultants); Director,
The Pep Boys - Manny,
Moe & Jack; Director,
Unitel Video, Inc.;
Former Secretary of
Commerce, Common
wealth of Pennsylvania
John B. Bailey Real estate consultant; 7,100(4) 0 7,100
71-1971 Retired CEO, Landauer *
Director Associates, Inc. (real
estate consultants)
(1977-1988)
Harvey Comita President and Director of 5,000(4) 477,300(5) 482,300
68-1992 Pan-Optics, Inc. (1971- 41%
Director 1991); Director of Mediq,
Incorporated (1981-1991);
Trustee, Transco Realty
Trust
All 7 Directors and 95,000(4) 541,830(3) 636,830
Executive Officers as 54%
a Group
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</TABLE>
* Less than one percent
(1) Unless otherwise indicated, beneficial ownership is based on sole
voting and investment power with respect to the Shares.
(2) Shares listed in this column represent Shares held by entities with
which the Directors or officers are associated. The Directors, officers
and members of their families have no ownership rights in the Shares
listed in this column. See note 3 below.
(3) This number includes the number of Shares held by Transco (477,300
Shares), CGI (54,530 shares) and T.G.I.F. Texas, Inc. ("TGIF") (10,000
shares). Several of the Directors of the Company are directors,
trustees, officers
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<PAGE>
or shareholders of certain of Transco, CGI and T.G.I.F. Of those Shares
owned by Transco, 24,350 have been pledged to a brokerage firm pursuant
to a margin agreement.
Mr. Wiener is the executive trustee of Transco and holds 24%of its
stock. Mr. Wiener is also director and officer of CGI which owns 21% of
Transco's stock. Mr. Wiener is Chairman of the Board, Chief Executive
Officer and a 40% shareholder. Mr. Wiener is a director and 18%
shareholder of TGIF. Mr. Wiener is the cousin of Bernard Lerner, Vice
President of the Company and Vice President of the Advisor.
For information concerning relationships of certain directors and
officers of the Company to the Advisor, see "Approval of Advisory
Agreement."
As a result of these relationships, the persons named above may be
deemed to share investment power and voting power of Shares held by
each firm with which they are associated in conjunction with a number
of other persons, including in several cases persons who are neither
directors nor officers of the Company.
(4) This number includes options granted under the 1990 Stock Option Plan,
none of which have been exercised. These options have been granted to
Mr. Wiener, 30,000; Mr. Rothstein, 15,000; 5,000 each to Mr. Arader,
Mr. Bailey, and Mr. Comita; and a total of 10,000 to two officers who
are not directors. Reference is made to "Compensation of Directors and
Executive Officers and Other Transactions" for further information
about the 1990 Stock Option Plan.
(5) This number represents the number of shares held by Transco, of which
Mr. Comita is a Trustee.
Meetings of the Board of Directors
The Board of Directors held three meetings during 1997. During this
period all of the Directors of the Company attended at least 75% of the total
number of meetings of the Board and any Committee of which they were a member.
Committees of the Board of Directors
The Board of Directors has an Audit Committee and a Stock Option
Committee. The Company does not have a Compensation Committee or a Nominating
Committee.
Messrs. Comita and Arader were appointed to the Audit Committee by the
Board of Directors effective April 4, 1997 replacing Messrs. Gray and Fieber.
See "Certain Transactions" for further information regarding the removal of
Messrs. Gray and Fieber from the Audit Committee. The primary responsibilities
of the Audit Committee are to review the annual financial statements of the
Company and to examine and consider such other matters in relation to the
internal and external audit of the Company's accounts and in relation to the
financial affairs of the Company and its accounts as the Committee may, in its
discretion, determine to be desir able. The Audit Committee met three times
during 1997.
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<PAGE>
Messrs. Arader and Bailey serve as members of the Stock Option
Committee. The Committee is authorized to grant options to officers and key
employees of the Company. The Stock Option Committee met once during 1997.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Executive officers receive no cash compensation from the Company in
their capacity as executive officers. Executive officers are eligible to receive
stock options pursuant to the 1990 Stock Option Plan. During 1997, no options
were granted to executive officers.
Compensation of Directors. Each Director receives an annual fee of
$5,000, plus expenses and $500 for each meeting attended of the Board of
Directors.
Grant of Options. During 1997, the Stock Option Committee, under the
1990 Stock Option Plan, did not grant any options.
<TABLE>
<CAPTION>
December 31, 1997 Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options as of
Options as of December 31, 1997 December 31, 1997 (1)
Name Exercisable/Unexercisable Exercisable/Unexercisable
- ------------------------------------- ----------------------------------------- ----------------------------------
<S> <C> <C>
Maurice Wiener 30,000/0 $0/0
Chief Executive Officer
Lawrence I. Rothstein 15,000/0 $0/0
Senior Vice President
Walter G. Arader 5,000/0 $0/0
Director
John B. Bailey 5,000/0 $0/0
Director
Harvey Comita 5,000/0 $0/0
Director
</TABLE>
(1) This value is based on the December 31, 1997 closing price for the Company's
Shares on the American Stock Exchange of $4 7/8, or $4.8750, per Share.
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<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance. Section 16(a)
of the Securities Exchange Act of 1934, as amended, requires the Company's
directors and executive officers to file with the Securities and Exchange
Commission initial reports of beneficial ownership and reports of change in
beneficial ownership of the Company's Shares. Such officers and directors are
required by SEC regulations to furnish to the Company copies of all Section
16(a) reports that they file. To the Company's knowledge, based solely on a
review of the copies of such reports furnished to the Company and written
representations that no other reports were required, all executive officers and
directors of the Company complied with the Section 16(a) filing requirements for
the fiscal year ended December 31, 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following discussion describes the organizational structure of the Company's
subsidiaries and affiliates.
Transco Realty Trust ("Transco").
Transco is a publicly-held 43% shareholder of the Company. Mr. Wiener
is the executive trustee and an officer of Transco and holds approximately 25%
of Transco's stock. Mr. Rothstein serves as a trustee and an officer of Transco.
Mr. Comita serves as a trustee of Transco.
Courtland Group, Inc. ("CGI").
Mr. Wiener is a director and officer of CGI, which owns 21% of
Transco's stock and owns approximately 5% of the Company's common stock. Mr.
Wiener is Chairman of the Board and a 40% shareholder of CGI. Mr. Rothstein
serves as Director and President of CGI. CGI served as the advisor of the
Company during the year ended December 31, 1997.
HMG Advisory Corp. (the "Advisor").
Effective January 1, 1998, the Advisor became the new advisor of the
Company. The Advisor is principally owned by Maurice Wiener, its Chairman and
CEO and a Director. Mr. Rothstein serves as President, Treasurer, Secretary and
a Director of the Advisor.
Courtland Investments, Inc. ("CII").
The Company owns a 95% non-voting interest in CII. The other 5% (which
represents 100% of the voting stock) is owned by a wholly-owned subsidiary of
Transco.
CII and its wholly-owned subsidiary own 100% of Grove Isle Club, Inc.,
Grove Isle Yacht Club Associates and Grove Isle Marina, Inc. CII also owns 15%
of Grove Isle Associates, Ltd., and the other 85% is owned by the Company.
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<PAGE>
On May 31, 1997, CII sold a 45% partnership interest in GIA, Ltd. to
the Company for approximately $4.6 million. This transaction was between
consolidated subsidiaries and accordingly had no impact on the consolidated
financial statements of the Company.
HMG-Fieber Associates ("Fieber").
The Company also owns a 65% interest in Fieber and the other 35% is
owned by NAF Associates ("NAF"). The partners in NAF include the following
related parties: Norman A. Fieber, a former director of the Company (33.62%),
Norman A. Fieber's son, James A. Fieber, (1.08%), Norman A. Fieber's brother,
Stanley S. Fieber, M.D. (7.59%), and Martine Avenue Associates (Martine), a New
York general partnership in which Mr. Gray, a former officer and director of the
Company, and Mr. Gray's sister are the partners (13.02%). The Company discovered
in May 1998 that Martine was liquidated and dissolved in 1996.
The following discussion describes all material transactions, receivables and
payables involving related parties. All of the transactions described below were
on terms as favorable to the Company as comparable transactions with
unaffiliated third parties.
The Advisor.
The day-to-day operations of the Company are handled by the Advisor.
Reference is made to "Approval of Advisory Agreement" below for further
information about the duties and remuneration of the Advisor.
CGI.
As of December 31, 1997 and 1996, CGI owed the Company $205,000 and
$417,000, respectively. Such sums bear interest at the prime rate plus 1% and
are due on demand.
Transco.
As of December 31, 1997, the Company has a note and accrued interest
receivable from Transco of $450,000 compared to $425,000 as of December 31,
1996. This note bears interest at the prime rate and is due on demand.
CII - T.G.I.F. Texas, Inc.
CII owns approximately 49% of the outstanding shares of T.G.I.F. Texas,
Inc. ("T.G.I.F."). Mr. Wiener is a director and officer of T.G.I.F and owns,
directly and indirectly, approximately 18% of the outstanding shares of T.G.I.F.
As of December 31, 1997, T.G.I.F. has amounts due from Mr. Weiner in the amount
of approximately $170,000. These amounts are due on demand and bear interest at
the prime rate. Also, T.G.I.F. owns 10,000 shares of the Company at $5 per share
which was the market value at the time of purchase. The Advisor receives a
management fee of $18,000 per year from T.G.I.F.
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<PAGE>
As of December 31, 1997 and 1996, CII owed approximately of $3.1
million and $2.5 million, respectively to T.G.I.F. All advances between CII and
T.G.I.F. are due on demand and bear interest at the prime rate plus 1%.
CII- Grove Isle.
In 1986, CII acquired from the Company the rights to develop the marina
at Grove Isle for a promissory note of $620,000 payable in 10 years at an annual
interest rate equal to the prime rate. The principal matures on January 2, 2001.
Interest payments are due each January 2. Because the Company consolidates CII,
the note payable and related interest income are eliminated in consolidation.
Transco - South Bayshore Associates ("SBA").
SBA is a joint venture in which Transco and the Company hold interests
of 25% and 75%, respectively. The major asset of SBA is a demand note from
Transco, bearing interest at the prime rate, with an outstanding balance of
approximately $450,000 in principal and interest as of December 31, 1997
compared to a balance of $425,000 as of December 31, 1996. Beginning in the
first quarter of 1992, Transco started paying a minimum of $5,000 per quarter on
account of the note.
The Company holds a demand note from SBA bearing interest at the prime
rate plus 1% with an outstanding balance as of December 31, 1997 of
approximately $935,000, in principal and accrued interest, compared to a balance
of $877,000, in principal and accrued interest, as of December 31, 1996. No
payments were made in 1997 and 1996, and accrued and unpaid interest was not
capitalized. Because the Company consolidates SBA, the note payable and related
interest income are eliminated in consolidation.
HMG-Fieber Wallingford Associates.
In April of 1986, James A. Fieber, Trustee, acting for The Fieber Group
purchased from the Company a two-thirds interest in a store located in
Wallingford, Connecticut leased to Grossman's, Inc., a chain of home improvement
stores, for $233,000 based on the appraised value of the store, less existing
indebtedness. Subsequently, on July 1, 1986, the Company purchased from Transco
its 8-1/3% interest in the Wallingford store and concurrently entered into an
agreement with The Fieber Group creating the joint venture titled HMG-Fieber
Wallingford Associates, owned two-thirds by James A. Fieber, Trustee, acting for
The Fieber Group, and one-third by the Company. Partners in The Fieber Group
included the following related parties: Norman A. Fieber, a former director of
the Company, James Fieber (Norman A. Fieber's son) and Martine Avenue
Associates, a New York general partnership in which Mr. Gray, a former officer
and director of the Company, and Mr. Gray's sister are the partners.
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<PAGE>
HMG-Fieber Associates ("Fieber").
On June 30, 1986, the Company purchased from Transco its 25% interest
in certain retail stores located in Connecticut, Maine, Massachusetts, New
Hampshire, New York, Pennsylvania, Rhode Island and Vermont and owned by South
Bayshore Associates, a joint venture owned 75% by the Company and 25% by
Transco. These stores were leased to Grossman's, Inc. under net leases, most of
which provided for minimum and percentage rent payments. The purchase price paid
the Company was $1,500,000 plus the assumption of liabilities of $660,355.
Concurrently, the Company sold to NAF a 35% interest in the Grossman's stores
for a price of approximately $2,100,000 plus the assumption of liabilities of
$924,497, and entered into an agreement with NAF creating the joint venture
titled HMG-Fieber Associates. The purchase price of Transco's 25% interest and
of NAF's 35% interest were based on the appraised value of the Grossman's
stores, less existing indebtedness. NAF is a Connecticut general partnership,
the partners of which include the following related parties: Norman A. Fieber, a
former director of the Company (33.62%), James A. Fieber, Norman A. Fieber's son
(1.08%), Stanley S. Fieber, M.D., Norman A. Fieber's brother (7.59%), and
Martine Avenue Associates, a New York general partnership in which Mr. Gray, a
former officer and director the Company, and Mr. Gray's sister are the partners
(13.02%).
Inquiry and Litigation Relating to HMG-Fieber Wallingford Associates and
HMG-Fieber Associates.
The Company has made certain claims and taken certain other actions
against Lee Gray, a former officer and Director of the Company, Norman A.
Fieber, a former Director of the Company, and certain related parties. The
Company's claims and actions arose from the failure of Messrs. Gray and Fieber
to disclose Mr. Gray's and Mr. Gray's sister's interest in the Company's
HMG-Fieber Wallingford Associates and HMG-Fieber Associates joint ventures (the
"Joint Ventures") and the inquiry into Messrs. Gray's and Fieber's failure to
disclose Mr. Gray's and Mr. Gray's sister's interest in HMG-Fieber Associates by
a Special Committee appointed by the Board of Directors (the "Inquiry"). The
Company is currently party, as both plaintiff and defendant, to litigation in
two jurisdictions stemming from the Inquiry and the actions taken by the Company
and Courtland Group, Inc., a Delaware corporation ("CGI"), subsequent to the
Inquiry. A summary of the Inquiry and the resulting litigation follows.
On November 15, 1996, the Board of Directors appointed a Special
Committee of the Board to review Mr. Lee Gray's failure to disclose his and his
sister's interest, through Martine Avenue Associates ("Martine"), a partnership
of Mr. Gray and his sister, in NAF Associates ("NAF"), the Company's 35% joint
venture partner in HMG-Fieber Associates ("Fieber"), as well as Mr. Norman A.
Fieber's failure to disclose Mr. Gray's and Mr. Gray's sister's interest in NAF.
Mr. Gray's interest in NAF first came to the attention of the Company in October
of 1996. James A. Fieber, Norman A. Fieber's son, and Stanley Fieber, Norman A.
Fieber's brother, are also partners in NAF. During the course of the Inquiry, it
was discovered that Mr. Gray and his sister also had an interest in a group of
investors organized by Mr. Fieber ("The
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<PAGE>
Fieber Group"), the Company's 66-2/3% joint venture partner in HMG-Fieber
Wallingford Associates, which venture operated from 1986 to 1992.
As a result of the Inquiry, it was determined that in 1986, Mr. Gray
and his sister, through Martine, acquired a 13.02% interest in NAF and a 20%
interest in The Fieber Group, but did not then or at any time since disclose
those interests to the Board of Directors of the Company. Norman A. Fieber, a
partner in both NAF and The Fieber Group, also failed to disclose to the Company
Mr. Gray's and Mr. Gray's sister's interests in NAF and The Fieber Group.
A special meeting of the Board of Directors was held on March 21, 1997,
at which the Board considered the report of the Special Committee. Based on the
Special Committee's report and in consultation with counsel, the Board concluded
that Mr. Gray breached his fiduciary duty to the Company and to the Advisor by
failing to disclose his and his sister's interest in NAF and The Fieber Group,
and that Mr. Norman A. Fieber breached his fiduciary duty to the Company and
assisted Gray by failing to disclose Mr. Gray's and Mr. Gray's sister's interest
in NAF and The Fieber Group.
The Board requested the resignation of Mr. Gray as President,
Treasurer, Director and as a member of the Audit Committee; requested the
resignation of Mr. Norman A. Fieber as a Director and member of the Audit
Committee; and requested that the Board of Directors of the CGI consider
requesting the resignation of Mr. Gray as President, Treasurer and Director of
the CGI.
Mr. Gray has been removed as President and Treasurer of the Company and
as a member of the Audit Committee and as President and a Director of CGI. Mr.
Gray refused to resign as a director of the Company. Norman A. Fieber has been
removed as a member of the Audit Committee of the Company but refused to resign
as a director of the Company. Mr. Gray and Mr. Norman A. Fieber were not
reelected as directors of the Company at the 1997 Annual Meeting of
Shareholders.
HMG Courtland Properties, Inc. v. Lee Gray et al.
On July 2, 1997, the Company filed suit in the Court of Chancery of the
State of Delaware in and for New Castle County against Lee Gray (individually
and as a partner in Martine Avenue Associates), Norman A. Fieber (individually
and as a partner in NAF Associates), Betsy Gray Saffell (Lee Gray's sister)
(individually and as a partner in Martine Avenue Associates), Martine Avenue
Associates, (a New York general partnership in which Mr. Gray and Mrs. Saffell
are the general partners) ("Martine"), NAF Associates (a Connecticut general
partnership in which Mr. Fieber and Martine are general partners, and the
Company's joint venture partner in HMG-Fieber Associates ("NAF"), and The Jim
Fieber Trust (a trust for beneficiaries including Mr. Fieber and Martine, and
the Company's joint venture partner in
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<PAGE>
HMG-Fieber Wallingford Associates, which has James A. Fieber, son of Norman A.
Fieber, as trustee) (the "Trust).
The Company's lawsuit is based on the facts underlying the Board of
Directors' conclusion, based upon the report of the Special Committee following
the Inquiry and in consultation with counsel, that Mr. Gray breached his
fiduciary duties to the Company and by failing to disclose his and his sister's
interest in the Joint Ventures, and that Mr. Fieber breached his fiduciary duty
to the Company and assisted Mr. Gray by failing to disclose Mr. Gray's and Mr.
Gray's sister's interest in the Joint Ventures. The Company's suit makes the
following claims: (i) breach of fiduciary duty against Mr. Gray' (ii) breach of
fiduciary duty against Mr. Fieber; (iii) aiding the abetting against Mr. Fieber,
Mrs. Saffell, Martine, NAF and the Trust; (iv) usurpation of a corporate
opportunity against all defendants; (v) common law fraud against Messrs. Gray
and Fieber; and (vi) conspiracy against all defendants. Relief being sought by
the Company includes: (i) damages; (ii) imposition of constructive trust for the
benefit of the Company over, and an accounting of, the defendant's interests in
the Joint Ventures; (iii) a recision of the transactions which created the Joint
Ventures; and (iv) a disgorgement of all interests and profits derived by all
the defendants from the Joint Ventures. The lawsuit is currently in the early
stages of discovery. The Company believes strongly that its claims are
meritorious and intends to vigorously pursue all legal remedies against all
defendants.
Lee Gray v. HMG/Courtland Properties, Inc. et al.
On May 22, 1997, Lee Gray, a former director and officer and a
shareholder of the Company and a former officer and director and a shareholder
of CGI, which served as the Company's advisor pursuant to an advisory agreement
which expired December 31, 1997, filed suit in the Circuit Court of the 11th
Judicial Circuit in and for Dade County, Florida against the following
defendants: (i) the Company; (ii) all of the directors and certain of the
officers of the Company and of CGI; (iii) CGI; and (iv) HMG Advisory Corp., a
Delaware corporation that began service as the Company's advisor on January 1,
1998 pursuant to the advisory agreement approved by the shareholders at the
Company's Annual Meeting held on June 27, 1997 (the "Advisor").
In his lawsuit, Mr. Gray, individually and derivatively as a
shareholder of CGI, alleges, among other things, that this removal as an officer
of the Company, his failure to nominated for reelection as Director of the
Company, his subsequent removal as an officer and director of CGI and the Board
of Directors' decision not to renew the Company's former advisory agreement with
CGI, were the product of a conspiracy involving certain officers and Directors
of the Company and of CGI who wanted to force Mr. Gray out of the Company and
CGI, and to terminate the Company's advisory agreement with CGI, for their own
financial gain. Mr. Gray has also alleged that he was libeled in the discussion
of the Inquiry and the results thereof in certain documents, including documents
filed with the Securities and Exchange Commission. Mr. Gray is seeking money
damages in excess of $15,000, punitive damages, and temporary and permanent
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<PAGE>
injunctive relief on the following grounds: (i) breach of fiduciary duty against
the directors and certain of the officers of the Company; (ii) libel against the
Company and the directors and certain of the officers of the Company; (iii)
breach of fiduciary duty against the officers and directors of CGI; and (iv)
tortious interference with an advantageous business relationship against
defendants Advisor and the officers and directors of CGI.
On July 10, 1997, the Company filed a motion to dismiss the portion of
the lawsuit directed against it and its directors. The motion to dismiss was
granted November 18, 1997. On December 1, 1997, Mr. Gray filed an amended
complaint that seeks to reinstate the libel claim against the Company. The
Company has moved to stay proceedings in this case pending the outcome of the
Company's Delaware action. The motion is currently subjudice. The Company and
its officers and directors believe strongly that they have meritorious defenses
to, and intend to vigorously defend against, the claims made by Mr. Gray.
CGI also filed a motion to dismiss the tortious interference claims
described in (iv) above which was granted.
Norman A. Fieber v. HMG/Courtland Properties, Inc. et al.
On July 8, 1997, Norman A. Fieber, NAF Associates and James A. Fieber,
Trustee (collectively, the "Fieber Plaintiffs") filed a separate lawsuit against
the Company in the Superior Court of the State of Connecticut,
Fairfield/Bridgeport Judicial District. In their lawsuit, the Fieber Plaintiffs
are seeking a declaratory judgment absolving them of any liability to the
Company on essentially all of the issues and claims being considered in the
Company's lawsuit in Delaware discussed above.
On August 27, 1997, the Company moved to dismiss, or in the
alternative, stay this action on the grounds that the declaratory judgment
action was inappropriate given the pendency of the Company's prior pending
lawsuit in Delaware. This motion was never decided. On June 16, 1998, the Fieber
Plaintiffs filed a notice of withdrawal of their claims and the matter is now
terminated.
APPROVAL OF ADVISORY AGREEMENT
The New Advisory Agreement. At the 1996 annual meeting of shareholders,
the advisory agreement between the Company and Courtland Group, Inc. ("CGI") was
renewed for a one year term expiring on December 31, 1997. On April 4, 1997, the
Board of Directors approved a new advisory agreement (the "Advisory Agreement")
between the Company and HMG Advisory Corp. (the "Advisor") for a term commencing
January 1, 1998 and expiring December 31, 1998. The Advisory Agreement was
approved by a majority of the shareholders of the Company at the 1997 Annual
Meeting of Shareholders on June 27, 1997. The Advisory
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<PAGE>
Agreement is substantially the same as the former advisory agreement but with a
25% reduction in the regular compensation paid to the Advisor.
The Advisor is majority owned by Mr. Wiener with the remaining shares
owned by certain officers, including Mr. Rothstein. The officers and directors
of the Advisor are as follows: Maurice Wiener, Chairman of the Board and Chief
Executive officer; Lawrence I. Rothstein, President, Treasurer, Secretary and
Director; Carlos Camarotti, Vice President Finance and Assistant Secretary; and
Bernard Lerner, Vice President. On April 3, 1998, the Board of Directors
approved the renewal of the Advisory Agreement. Under the terms of the Advisory
Agreement, the renewal must be approved by the holders of a majority of the
Shares. If the holders of a majority of the Shares approve the renewal of the
Advisory Agreement, the Advisory Agreement will be renewed for a one year term
commencing on January 1, 1999 through December 31, 1999.
The following description of the Advisory Agreement contains a summary
of its material terms.
General Provisions. The Advisory Agreement is not assignable without
the consent of the unaffiliated Directors of the Company and the Advisor. The
Advisory Agreement provides that officers, directors, employees and agents of
the Advisor or of its affiliates may serve as Directors, officers or agents of
the Company.
Duties of Advisor. The Advisor in performing its duties under the
Advisory Agreement is at all times subject to the supervision of the Directors
of the Company and has only such authority as the Directors delegate to it as
their agent. The Advisor counsels and presents to the Company investments
consistent with the objectives of the Company and performs such research and
investigation as the Directors may request in connection with the policy
decisions as to the type and nature of investments to be made by the Company.
Such functions include evaluation of the desirability of acquisition, retention
and disposition of specific Company assets. The Advisor also is responsible for
the day-to-day investment operations of the Company and conducts relations with
mortgage loan brokers, originators and servicers, and determines whether
investments offered to the Company meet the requirements of the Company. The
Advisor provides executive and administrative personnel, office space and
services required in rendering such services to the Company. To the extent
required to perform its duties under the Agreement, the Advisor may deposit into
and disburse from bank accounts opened in its own name any money on behalf of
the Company under such terms and conditions as the Company may approve.
Allocation of Expenses. Under the Advisory Agreement, the Advisor pays:
all salary and employment expenses of its own personnel and of the officers and
employees of the Company who are affiliates of the Advisor; all of the
administrative, rent and other office expenses (except those relating to a
separate office, if any, maintained by the Company) relating to its services as
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<PAGE>
Advisor; and travel (to the extent not paid by any party other than the Company
or the Advisor) and advertising expenses incurred in seeking investments for the
Company.
The Company is required to pay all expenses of the Company not assumed
by the Advisor, including, without limitation, the following: (a) the cost of
borrowed money; (b) taxes on income, real property and all other taxes
applicable to the Company; (c) legal, accounting, underwriting, brokerage,
transfer agent's, registrar's, indenture trustee's, listing, registration and
other fees, printing, engraving, and other expenses and taxes incurred in
connection with the issuance, distribution, transfer, registration and stock
exchange listing of the Company's securities; (d) fees and expenses of advisors
and independent contractors, consultants, managers and other agents employed
directly by the Company; (e) expenses connected with the acquisition,
disposition or ownership of mortgages or real property or other investment
assets, including, to the extent not paid by any party other than the Company or
the Advisor, but not limited to, costs of foreclosure, costs of appraisal, legal
fees and other expenses for professional services, maintenance, repairs and
improvement of property, and brokerage and sales commissions, and expenses of
maintaining and managing real property equity interests; (f) the expenses of
organizing or terminating the Company; (g) all insurance costs (including the
cost of Directors' liability insurance) incurred in connection with the
protection of the Company's property as required by the Directors; (h) expenses
connected with payment of dividends or interest or distributions in cash or any
other form made or caused to be made by the Directors to holders of securities
of the Company, including a dividend reinvestment plan, if any; (i) all expenses
connected with communications to holders of securities of the Company and the
other bookkeeping and clerical work necessary in maintaining relations with
holders of securities, including the cost of printing and mailing checks,
certificates for securities and proxy solicitation materials and reports to
holders of the Company's securities; (j) to the extent not paid by borrowers
from the Company, the expenses of administering, processing and servicing
mortgage, development, construction and other loans; (k) the cost of any
accounting, statistical, or bookkeeping equipment necessary for the maintenance
of the books and records of the Company; (l) general legal, accounting and
auditing fees and expenses; (m) salaries and other employment expenses of the
personnel employed by the Company who are not affiliates of the Advisor, fees
and expenses incurred by the Directors, officers and employees in attending
Directors' meetings, and fees and travel and other expenses incurred by the
Directors and officers and employees of the Company who are not affiliates of
the Advisor.
Expenses relating to the grant of options to all officers and employees
of the Company under a plan approved by the shareholders of the Company are
borne by the Company.
Remuneration of the Advisor. For services rendered under the current
advisory agreement, the Advisor is entitled to receive as regular compensation a
monthly fee equal to the sum of (a) $55,000 (equivalent to $660,000 per year)
and (b) 20% of the amount of any unrefunded commitment fees received by the
Company with respect to mortgage loans and other commitments which the Company
was not required to fund and which expired within the next
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<PAGE>
preceding calendar month. In 1995, 1996 and 1997, CGI's annual regular
compensation amounted to $875,000, $875,000 and $875,000, respectively.
The Advisory Agreement also provides that the Advisor shall receive
incentive compensation for each fiscal year of the Company equal to the sum of
(a) 10% of the realized capital gains (net of accumulated net realized capital
losses) and extraordinary non-recurring items of income of the Company for such
year, and (b) 10% of the amount, if any, by which Net Profits of the Company
exceed 8% per annum of the Average Net Worth of the Company. "Net Profits" is
defined as the gross earned income of the Company for such period (exclusive of
gains and losses from the disposition of assets), minus all expenses other than
non-cash charges for depreciation, depletion and amortization and the incentive
compensation payable to the Advisor, and minus all amounts expended for mortgage
amortization on long-term mortgage indebtedness, excluding extraordinary and
balloon payments. "Average Net Worth" is defined as the average of the amount in
the shareholders' equity accounts on the books of the Company, plus the
accumulated non-cash reserves for depreciation, depletion and amortization shown
on the books of the Company, determined at the close of the last day of each
month for the computation period.
If and to the extent that the Company requests the Advisor, or any of
its directors, officers, or employees, to render services for the Company, other
than those required to be rendered by the Advisor under the Agreement, such
additional services are to be compensated separately on terms to be agreed upon
between such party and the Company from time to time, which terms must be fair
and reasonable and at least as favorable to the Company as similar arrangements
for comparable transactions of which the Company is aware with organizations
unaffiliated with the Advisor. CGI received fees of $30,000 and $30,000, in 1997
and 1996, respectively, for managing certain of the Company's affiliates.
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<PAGE>
Set forth below is the aggregate compensation paid to CGI during the
two fiscal years ended December 31, 1997:
<TABLE>
<CAPTION>
Form of Compensation Amount
-------------------- ------
1996 1997
---- ----
<S> <C> <C>
Regular Compensation............................................... $ 875,000 $ 875,000
20% of Unrefunded Commitment Fees.................................. -0- -0-
Incentive.......................................................... 192,000 386,000
Management Fees.................................................... 30,000 30,000
------ ------
Total.............................................................. $ 1,097,000 $ 1,291,000
=========== ===========
</TABLE>
Brokerage Fees Paid the Advisor. Under the Advisory Agreement, the
Advisor and its affiliates are prohibited from receiving from the Company any
brokerage or similar fees for the placement of mortgages or other investments
with the Company. However, the Advisor and its affiliates can receive normal
brokerage commissions from borrowers in connection with transactions involving
the Company, provided that such commissions are fully disclosed to all Directors
of the Company and the Directors approve of the transaction and that such
commissions (which to the extent paid by the borrower and retained by the
Advisor or its affiliates may reduce the yield to the Company) are fair and
reasonable and in accord with the prevailing rates in the locality in which the
transaction is consummated for the type of transaction involved. The Advisor and
its affiliates may, subject to the same terms and conditions, receive normal
brokerage commissions from sellers, buyers, lessees and other parties with whom
the Company engages in transactions.
Management of the Advisor
Set forth below are the names, offices with the Advisor and principal
occupations of the current executive officers and directors of the Advisor.
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<PAGE>
<TABLE>
<CAPTION>
Names and Offices
with the Advisor Principal Occupation
<S> <C>
Maurice Wiener.......................................See "Election of Directors."
Chairman of the Board of
Directors and Chief
Executive Officer
Lawrence I. Rothstein................................Senior Vice President, Treasurer, Secretary and
President, Treasurer, Secretary Director of the Company; Vice President,
and Director Treasurer, Secretary and Trustee of Transco.
Bernard Lerner.......................................Vice President of the Company.
Vice President
Carlos Camarotti.....................................Vice President and Assistant Secretary of the
Vice President-Finance and Company.
Assistant Secretary
</TABLE>
The Directors recommend that the shareholders approve the Agreement. An
affirmative vote by the holders of a majority of the Shares present in person or
by proxy at the Annual Meeting of Shareholders is required for approval of the
Agreement.
INDEPENDENT ACCOUNTANTS
The Company has engaged BDO Seidman, LLP ("BDO"), its independent
accountant for the fiscal year ended December 31, 1997, as its independent
accountant for the fiscal year ending December 31, 1998.
Representatives of BDO are not expected to be present at the meeting.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company. In
addition to the use of the mails, proxies may be solicited by Directors,
officers and employees of the Company personally, by telephone or by telegraph.
OTHER BUSINESS
The Board of Directors is not aware of any business other than those
items referred to above to be presented for action at the meeting. However,
should any other matters requiring a
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vote of the shareholders arise, the agents named in the accompanying proxy will
vote in accordance with their own best judgment.
In order for proposals of shareholders to be considered for inclusion
in the proxy materials for presentation at the 1999 annual meeting of
shareholders, such proposals must be received by the Company no later than
January 23, 1999.
----------------------
A copy of the Annual Report on Form 10-KSB for the year ended December
31, 1997, including financial statements and schedules thereto, filed with the
Securities and Exchange Commission, may be obtained by shareholders without
charge upon written request to: Secretary, HMG/Courtland Properties, Inc., 2701
South Bayshore Drive, Coconut Grove, Florida 33133.
----------------------
YOU CAN SAVE YOUR COMPANY ADDITIONAL EXPENSE BY SIGNING
AND RETURNING YOUR PROXY AS PROMPTLY AS POSSIBLE
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